Forrester: Marketers Are The Catalyst To Fix The Broken Agency Model

The agency-client relationship is ailing, and fixing what’s broken will involve deep organizational changes on both sides of the table – starting with the marketer.

“The brand has to start with itself,” said Brigitte Majewski, Forrester analyst and author of a report released Thursday calling for a new agency operating model. “If you aren’t asking for the right things from agencies, you’re never going to get the right things.”

Forrester lays out a four-step plan to help brands and agencies align their organizations and working relationships less around channel-focused silos and more around customer journeys. To get there, clients must break down internal silos, take ownership of their data and pay their agencies for business outcomes.

“Most marketers get the need, but few have made the organizational and agency partner changes required to manifest this customer-centric calling,” the report found. “Marketers must think beyond the media plan to how to orchestrate and optimize the entire experience.”

Agencies get a bad rap for internal silos that lead to fragmented expertise, competition between channels and inconsistencies in data and technology across their networks. While holding companies try break down silos by operating on single P&Ls, brands can’t take advantage of cohesive offers until they break down their own silos.

For example, if the CMO oversees the media budget and CTO handles the budget for a mobile app and website, the agency will be hindered in its effort to reach customers across their journeys, Majewski said.

But breaking down legacy silos at massive organizations is easier said than done.

“Start with one project where you allow the agency to do something a little bigger and have a measurement and test plan against that,” Majewski said. “Then you do something bigger the next time.”

Once brands break down internal silos, they can bring more stakeholders, like IT and customer service, into their marketing conversations.

“Start by bringing folks [from customer service and technology] into the annual planning cycle because brand promises manifest themselves at those touch points,” Majewski said.

Breaking down silos can help marketers and agencies align on strategy, but marketers must tweak their payment structures to reward and incent quality work from their partners.

While agencies invest more in technology and the talent to operate it, marketers continue to pay their partners on a full-time employee model, which incentivizes agencies to understaff accounts to counter shrinking margins. Over the past quarter century, pricing for comparable agency work has dropped 65%, according to agency consultant Michael Farmer.

“Marketers keep cutting the fees and growing the workload, as if the agencies have a surplus of resources,” Farmer said.

To encourage value over cost savings and ease pressure on agency margins, marketers can embrace performance pay models and stop paying for work that can be automated. Performance pay requires ongoing measurement and optimization of core KPIs, rather than a post-mortem review of agency work, Majewski said.

“A lot of measurement is static and backwards looking,” she said. “Instead, use your measurement to decide, ‘Should I deliver a message here based on context or utility? If so, which one and how much should I pay for it?’”

But it’s difficult to quantify the performance of creative work. And marketers are skeptical of performance pay because they don’t want to grade agency homework, so agencies have to do it themselves.

Restoring the agency-client relationship will come down to rebuilding trust. Data is a marketer’s most prized asset, and sharing it with an agency requires a renewed trust that’s deteriorated significantly in the past few years.

Majewski said agencies can rebuild trust by being upfront about what they can and can’t do. With more honesty, agencies “will not be able to hide behind murky metrics or grow through expanded services in which they have limited expertise,” the report said.

“Put out on the table what your agency can’t do,” she said. “Let’s drop the charade that agencies know everything and learn together.”

While Forrester lays out a nice framework, there’s no magic bullet for fixing agency-client relationships.

“I wish there was a simple blueprint or recipe for every brand to follow, but there isn’t,” Majewski said.

2 Comments

Well put and clients are certainly looking for change to take place. We are certainly seeing more and more clients starting to do test campaigns without their agencies. Programmatic is making the booking process both easier and more automated, so agencies need to look carefully at where they can add value the client can't now buy off the shelf. A return to analysis and strategy development is where the biggest opportunities lie.

Yes, definitely agree! I am writing a piece on where many agencies go wrong. Agencies live in the data so there’s no key player in the marketing machine that’s more equipped to provide valuable insight to the client – especially us media agencies.